Ark Invest's Cathie Wood recently made her thoughts clear in an interview she hosted with economist Arthur Laffer, who had some strong opinions of his own.
The Ark Innovation ETF (ARKK) manager and Laffer discussed their views on the Federal Reserve's actions during the past year, and the recent banking crisis, on March 24.
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"We are in a banking crisis," Wood said. "We are in a very important time."
She then said that, in times of crisis, she often approaches Laffer, who she calls her mentor, for his views on the situation. Wood's decision to air the interview with Laffer is a big statement of its own.
"I trust your judgment call," Wood told Laffer. "I'd just like to get your statement on what is going on right now."
"We've had very bad fiscal policy since covid-19," Laffer said. "Huge increases in spending, huge increases in debt. Fiscal policies are going in the wrong direction."
Laffer noted that President Joe Biden's latest budget amounts to $6.9 trillion in spending.
"He wants to raise taxes on the most productive members of society, the high income people, which is very disturbing to me if you want to have output employment production." Laffer said. "The U.S. has been on a long slide down since the mid-1980s. The expected real return on capital has been declining almost throughout that whole period."
Laffer was an economic adviser to Donald Trump's 2016 presidential campaign and worked in the Ronald Reagan administration. He is well known for the Laffer Curve, his controversial theory that lower taxes lead to increased revenue.
"Then we have the monetary side where we've decided that we want to have monetary policy run by people who look like other people, rather than who are the brains of great monetary people, like Paul Volcker, Alan Greenspan or McChesney Martin," he said.
"We have a Fed that is modestly inexperienced and really doesn't understand these types of crises," he continued. "They have been over the recent period of time expanding the monetary base dramatically."
Laffer then relates monetary policy to the current trouble with banks.
"We've set up sort of a boiler experiment on the U.S. economy and that boiler experiment has to break somewhere," Laffer said. "There is some little tiny catalyst that just sets the thing off. The first one of recent times is Silicon Valley Bank. Then you had Signature, then you have Credit Suisse, you have Republic, you have a bunch of others."
"Now I believe they've even gone into the cryptocurrencies, trying to pull them down as well," he added. "And you have a real serious problem in the banking system where the intrinsic problems of fiscal policy and monetary policy have not been done."
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